Jill On Money: What to do with your tax refund

Jill Schlesinger on

Tens of millions of Americans have already received tax refunds – and millions more will cash checks before tax season is over.

While recipients are usually happy that they have extra money, a tax refund is a lousy deal. Instead of thinking about the money as a windfall, Buzz-Kill Jill is here to tell you that you just made an interest-free loan to Uncle Sam!

To make sure that you don’t repeat the refund next year, go to and use the withholding estimator tool and then adjust your withholding at your employer or if you are self-employed, consider reducing your quarterly tax payments. Once you have addressed the refund issue, the next question is: What are you going to do with your refund?

(1) Fund an emergency reserve that can cover 6-12 months of living expenses

(2) Reduce credit card or other high interest debt

(3) Fund retirement plans to the best of your ability, especially if you have an employer match


The limit for 2024 is $7,000 for those under the age of 50, with an additional $1,000 if you are over 50. The difference between a Roth and Traditional is WHEN you pay taxes.

A Roth contribution is made with after-tax dollars, so there’s no deduction today, but when you withdraw funds in retirement, there is NO tax due.

Tax experts are encouraging more people to use Roths, even if they are in high current brackets or live in high tax states. The rationale is that tax rates are likely to rise in the future and even if they remain at these historic low levels, it is beneficial to have some retirement money that has already been taxed.

With traditional IRAs, you are entitled to a tax deduction today, but when you withdraw the money (as early as age 59½), the government will tax all of the funds as income, at whatever your tax bracket is at that time.


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